Using the new Main Residence NRB
The new Main Residence NRB started taking effect in April 2017. It requires assets that are listed as the client's main residence to be left to a direct descendant, this includes children, step-children, grand-children, etc.
To do this in our calculator, first you must add an asset that has the category of 'Property - Main Residence' and in the Planning already in place section, select 'Leave to Residual Estate'.
Once this has been done, in the Suggested Planning tab on the left-hand side, you will see this asset with a dropdown on the right. In this dropdown, select the option for 'Leave to Direct Descendant' and then click Save Changes.
For a full overview of how this works: UK Government Website on MRNRB
This measure introduces an additional nil-rate band when a residence is passed on death to a direct descendant.
- This will be:
- £100,000 in 2017 to 2018
- £125,000 in 2018 to 2019
- £150,000 in 2019 to 2020
- £175,000 in 2020 to 2021
It will then increase in line with Consumer Prices Index (CPI) from 2021 to 2022 onwards. Any unused nil-rate band will be able to be transferred to a surviving spouse or civil partner.
The additional nil-rate band will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil-rate band, are passed on death to direct descendants.
There will be a tapered withdrawal of the additional nil-rate band for estates with a net value of more than £2 million. This will be at a withdrawal rate of £1 for every £2 over this threshold.
The existing nil-rate band will remain at £325,000 from 2018 to 2019 until the end of 2020 to 2021.
Jointly owned homes
If the asset is owned by both your clients jointly, on first death the asset will automatically be inherited by the spouse and the deceased client's Main Residence NRB will transfer to the spouse to be used on second death.
It is possible to utilise the planning option for 'Tenants in Common (Share to Direct Descendant)'. This will split the value of the property on first death and the part owned by the deceased client will leave the estate and make use of the new Main Residence NRB.